Christopher Kent: Additional monetary policy tools - reflections and a new framework
Speech by Mr Christopher Kent, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, at the Reserve Bank of Australia, Sydney, 29 June 2026.
Thank you for coming to the Reserve Bank of Australia (RBA). I would like to acknowledge the Gadigal People of the Eora Nation, the traditional owners of the land we meet on. I pay my respects to their Elders past and present and extend that respect to all First Nations peoples present.
Today I'll discuss the Monetary Policy Board's (MPB's) new Framework for Additional Monetary Policy Tools at low interest rates. We have just published this alongside my speech.
The framework helps to prepare us for any future episode in which the cash rate is very low. It draws on our recent experience, the experience of our peers and the broader literature. We also tapped into the helpful guidance of three external experts: Loretta Mester, Malcolm Edey and Begoña Domínguez.
The framework is a guide to making decisions about additional monetary policy tools. It sets out how we – the MPB and RBA staff – would approach the design, the use of, and the exit from, additional tools. It highlights the key judgements and decisions the MPB would need to make. The framework is not prescriptive. It can't be, because future shocks are unlikely to look like the pandemic or earlier crises overseas.
Although today's focus is on additional tools, the cash rate target remains our primary and preferred instrument for achieving low inflation and full employment. It is well understood and highly effective. Indeed, during the pandemic the largest contribution we made to supporting the economy came from lowering the cash rate target to historically low levels and keeping it there for some time. Additional tools can play an important role during extraordinary times and provide some extra support, but they are more complex and carry greater risks. Their effectiveness is also uncertain and depends on the context and the nature of the shock.